Eyes turn to tribunal hearing as mediation fails in Rogers-Shaw merger

Two events this past week – Innovation Minister François-Philippe Champagne's press conference on Tuesday and the apparent collapse Thursday of mediation talks between the Competition Bureau and Shaw Communications Inc., Rogers Communications Inc. (with an ally in Quebecor Inc.) – represents a divergence between Innovation, Science, and Economic Development policy and Competition Bureau policy, according to one financial analyst. In a note published Thursday night for subscribers, National Bank analyst Adam Shine wrote that the Competition Bureau's continued refusal to approve the merger was "intriguing," and would ultimately lead to continued volatility in the stock prices for the two companies trying to merge. "It remains intriguing that a sale of Freedom to Quebecor appears to be a reasonable remedial solution for ISED and effectively the Canadian government, with recently stipulated conditions accepted by Quebecor," Shine wrote, "but the Competition Bureau, despite apparently added concessions by Rogers, remains steadfast in its opposition and desire to extend the process with litigation." "Shaw wants out and Quebecor wants in," the analyst added. "The Competition Bureau has indicated that it doesn’t care about Shaw’s motivation to sell, but presumably governments as well as consumers and businesses out West want to see full engagement and investment by telecom operators in their provinces." The three companies trying to make their case issued a joint statement Thursday night pointed to Quebecor's acquiescence to Champagne's demands. "The combined Videotron-Freedom business will have everything it needs to compete as a stronger fourth carrier for the long term, including critical 5G spectrum," the three companies wrote. "Quebecor's commitment to lower wireless prices for Canadians across the country is one of the many benefits that the proposed transactions will create." The companies also wrote that they are "disappointed with this outcome and believe that litigation is both unnecessary and harmful to competition," and blamed the Competition Bureau's " unwillingness to meaningfully engage", which they said "unduly delays lower wireless prices for Canadian consumers." Shine wrote that following the rejection of mediation and the apparent direction towards litigation before the Competition Tribunal, "investors should expect ongoing volatility in the shares of Rogers and Shaw as well as Quebecor." Centre for International Governance Innovation fellow and former Competition Bureau special advisor Keldon Bester said that while it is highly unlikely that a settlement will be reached before the Nov. 7 beginning of the tribunal hearings, there is still a strong possibility of settlement at some stage. The appearance last week of the CRTC's MVNO could play a factor, Bester said, in what the Tribunal ultimately believes is an adequate remedy to the bureau's concerns about competition in the wireless market. "You could not only require Quebecor to agree to 10-year , agree to lower its prices, you could impose on both Quebecor and Rogers MVNO enabler-type requirements, as a shortcut to what the CRTC is trying to do," Bester said. Bester said that the outcome wasn't necessarily likely, but added that the tribunal has "phenomenal latitude" in determining appropriate remedies. "We're into a situation now where we have these branching paths where the tribunal can agree or disagree or accept or reject different elements of the arguments being made, and it can also potentially introduce some creativity – likely based on what's been provided to them so far," he said. Bester also said that it was within the power of the Champagne to amend the conditions on the approval that he introduced earlier in the week, and pointed to the new policy direction proposed for the CRTC in May. Indeed, in the proposed policy direction ISED grants itself a level of leeway when it comes to influencing the MVNO regime. The proposed policy directs the CRTC to “monitor and assess the effectiveness of its approach" and " encourage broader service-based competition" if competition is weakened under the regime. At the same time, according to background documents at the time, the government is prepared to intervene in the MVNO model "if needed." — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

Eyes turn to tribunal hearing as mediation fails in Rogers-Shaw merger

News | October 28, 2022

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Eyes turn to tribunal hearing as mediation fails in Rogers-Shaw merger

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